Lenders on real property often hold a large number of mortgages at one time. These mortgages, individually and collectively, have various characteristics that demonstrate more or less probability that the borrower may default, or that there will be a loss to the lender in the event of borrower default or, on the other hand, that they will be repaid before the stated term of the loan is complete. These mortgages also have various characteristics that demonstrate more or less probability that the borrower will seek refinancing or apply for additional credit. Each loan may be evaluated individually by a particular lender in efforts to determine the likelihood of repayment on those loans, or the likelihood of default, or of loss in the event of a default. This consideration may include the credit rating of the borrower(s), the payment history, the current market trends, and many other variables. This process, for the lender, can be very time-consuming and costly. Additionally, it is made more difficult because of the large number of loans held by most mortgage lenders.
Because of the need for quick, accurate and inexpensive evaluation of the risk of loss in the event of a default due to exposure of individual or multiple mortgages held by a lender, and to provide some measure of the propensity of a borrower to seek refinancing or additional mortgage credit, this invention has been created. This invention enables a lender to quickly estimate the potential loss exposure of an individual property or group of properties, and estimate the propensity of a borrower to seek refinancing or additional mortgage credit. This invention improves upon the prior art in that it does not require obtaining a purchase offer, a sale price or an appraisal of the property. Any of these options are not practical given a large group of properties for which mortgages are held by a lender. Appraisals are expensive, and sale prices can only be known when the property is actually sold. The method of this invention provides an inexpensive, quick, highly accurate and sensitive means to judge the risk due to exposure in the case of a default for a property or group of properties, or the worthiness and openness of a property and its owner to refinance or qualify for additional borrowing.
This invention improves on the prior art in its accuracy, simplicity, cost, its sophistication and its sensitivity. It also enables the mortgage lender to specify what level of safety is desired, either based upon some measure or at a set percentage. Nothing in the prior art performs the same functions and processes described herein. Most notably, no prior art combines the useful diagnostic tool, combined with additional methods here, previously disclosed in the now-pending patent application, owned by the same assignee as this application entitled Method and Apparatus for Constructing a Forecast Standard Deviation for Automated Valuation Modeling application Ser. No. 10/944,593 filed on Sep. 17, 2004 respectively into a cohesive and valuable whole. Also, the data stratum created using the now-pending patent application entitled Method and Apparatus for Spatiotemporal Valuation of Real Estate application Ser. No. 10/892,618 filed on Jul. 16, 2004 may be used in the preferred embodiment.